The Buyers Guide to Cloud ERP Software - Part Two: Integrated Inventory Management, Fulfilment and Shipping

A major component of cost control is ensuring that inventories are replenished at the appropriate times. When you have more inventories on hand than required, it increases your cost of goods sold (COGS), which in turn hits the profit margins of your company’s various product lines. To manage each product’s margins with a clear view into inventory costs, turn rates and inventory profitability, a good financial management system will incorporate strong inventory management controls and provide you with complete real-time visibility into demand, supply, costs and fulfilment trends.

Key capabilities of inventory management include bin and lot management, landed cost, demand-based replenishment, customer and volume pricing, and multi-location inventory. Keeping track of performance around these areas will enable your company to gain control over inventory replenishment and ensure that you have enough product on hand to fill anticipated orders, while keeping excess stock and related costs to a minimum. In this manner, you can slash inventory costs by tightening control of stock levels while increasing operational efficiencies. K?nig Wheels saved $120,000 annually by using a business management system with integrated inventory management capabilities while simultaneously doubling its sales in four years. K?nig was also able to reduce its need for physical inventory by 25% with just-in-time shipments.

Strong inventory management capabilities also enable you to track the specific cost for each lot as products are bought and sold. As a result, your company gains pricing flexibility by being able to assign different prices to different types of customers and sales channels, such as wholesale, retail or online sales. This strategy helps you increase your customer footprint and extract maximum value, while at the same time controlling your costs. Furthermore, integration with your back-office accounting system allows your finance staff to calculate demand plans leveraging historical data and model how expected sales and purchase orders affect future inventory levels.

While having detailed inventory management functionality certainly helps you maintain stringent controls over your margins, it can add even more value when integrated with fulfilment and shipping. With integrated inventory, order fulfilment management and shipping, you can eliminate manual re-entry, order processing errors, and the costs of reconciling shipping information. In fact, according to independent analyst firm Nucleus Research, companies typically save as much as 35% on annual shipping costs with a single, integrated back-office system for inventory and fulfilment. You can also reduce fulfilment errors by electronically routing orders to suppliers for drop shipping and improve your returns process with integration between order management and return merchandise authorisation.

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